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How to Make Modifiable Accounting Contract

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in this video were going to talk about the completed contract method in accounting so in our last video we talked about how when you have a long term contract theres a couple different ways you can go about accounting for the revenue that you recognize on the contract and one way is you can wait until the contract has been completed so upon completion were talking about lets say its a five-year contract the end of year five you go ahead and recognize the revenue the other way is to recognize revenue throughout the project with the percentage of completion method that we talked about before so in this video now I want to talk about this this first month is waiting until the end of the contract to actually book any of the revenue thats what were going to discuss so I think its important to kind of review a little bit from our example with the percentage of completion and itll make it make a little bit easier for you to understand because theres a lot of similarities so we said

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What is the modification of a contract?

A contract modification (mod) is any written change by the contracting officer to the contract terms and conditions. A mod can be issued at any time after the contract is awarded.

What type of modification is used to make an administrative change to a contract?

A unilateral modification (change order) may be used to: Make administrative changes. Issue change orders under a contract change or other clause.

How do you account for contract modifications?

A contract modification that only affects the transaction price is either accounted for prospectively or on a cumulative catch-up basis. It is accounted for prospectively if the remaining goods or services are distinct. There is a cumulative catch-up if the remaining goods or services are not distinct.

What is an example of contract modification IFRS 15?

IFRS 15 example sale of a product After 150 units have been delivered, the contract is modified to require the delivery of an additional 50 units (ie 250 in total). At the modification date, the stand-alone selling price of one unit of the product has fallen to 75.

What is a bilateral modification used for?

A bilateral modification is typically used to: Negotiate equitable adjustments when a change order occurs. Definitize letter contracts. Reflect other types of modifications.

What is an example of bilateral modification?

Examples of bilateral modifications you might request include: A request for contracting officer confirmation of a constructive change. A request for an equitable adjustment in response to a unilateral contract modification by the contracting officer.

What are the two types of contract modifications?

There are two types of contract modifications: unilateral and bilateral. Unilateral modifications are signed only by a contracting officer and are generally used to make administrative changes, issue change orders, make changes authorized by clauses other than the Changes clause, and issue termination notices.

What constitutes a contract modification?

A contract modification (mod) is any written change by the contracting officer to the contract terms and conditions. A mod can be issued at any time after the contract is awarded.

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